Free car-buying glossary · from the dealership side of the desk

Car-buying glossary: every dealer term, in plain English.

227 words you’ll hear at the dealership, from the sales floor to the finance office, explained in one to three sentences. The 64 most-searched terms have their own page with a worked example and the exact words to use.

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227 terms

A

Acquisition fee: A fee the leasing company charges to set up a lease, commonly several hundred to about a thousand dollars. It can be paid at signing or rolled into the lease; some dealers mark it up. Example and what to say →
Actual cash value: What a car is really worth in today’s market. At a dealership, ACV is what the store truly values your trade at; the “trade allowance” on the worksheet can be higher or lower. Insurers also use ACV to settle total-loss claims. Example and what to say →
Addendum sticker: A second window sticker the dealer adds next to the factory sticker, listing dealer add-ons and markups. Everything on it is the dealer’s, not the manufacturer’s, and is negotiable.See also: Dealer add-ons, Market adjustment
Adverse action notice: A notice a lender must send if it denies your credit application or offers worse terms based on your credit. It tells you which credit bureau was used and how to get a free report.See also: Risk-based pricing notice
Advertised price: The price a dealer shows in an ad or online listing. Read the fine print: it may exclude fees, require financing with the dealer, or include rebates not everyone qualifies for.See also: Out-the-door price, Bait and switch
Aged inventory: Cars that have been on the dealer’s lot a long time, often 60 to 90 days or more. They cost the dealer money every day, so they often carry bigger discounts.See also: Floor plan, Days supply
Allocation: The number of new cars of each model a manufacturer assigns to a dealer. Low allocation on a popular model is one reason dealers add market adjustments.See also: Market adjustment, Factory order
Amount financed: The total you are borrowing on a car loan: the price plus taxes, fees and any products you buy, minus your down payment, rebates and trade-in equity. It appears in the Truth in Lending box on your contract. Example and what to say →
APR: The annual percentage rate: the yearly cost of a loan expressed as a percentage, including interest and certain required finance charges. It is the number to compare between lenders, because a lower APR on the same amount and term always costs less. Example and what to say →
Arbitration clause: A section of many car contracts that requires disputes to be decided by a private arbitrator instead of a court, often with a waiver of class actions. Some contracts let you opt out within a short window. Example and what to say →
As-is: A used car sold with no warranty from the dealer: once you buy it, repairs are your responsibility. Dealers must disclose this on the FTC Buyers Guide window sticker, and some states limit or prohibit as-is sales. Example and what to say →

B

Bait and switch: Advertising a car or price to get you in the door, then saying it’s sold or unavailable and steering you to something more expensive. Print or screenshot the ad and ask for that exact vehicle by VIN.See also: Advertised price
Balloon payment: A large lump sum due at the end of some loans after lower monthly payments. Know the amount and have a plan to pay or refinance it.See also: Loan term
Battery state of health: How much capacity an EV or hybrid battery has left compared with new, usually shown as a percentage. Ask for a battery health report when buying a used EV.See also: Pre-purchase inspection
Be-back: Sales slang for a shopper who leaves saying they’ll be back. Dealers often make their best offers to avoid a be-back, which is why being willing to leave is powerful.
Bill of sale: A document recording the sale of a car, with buyer, seller, price, date, VIN and mileage. Many states require one for private sales; keep a signed copy.See also: Private party value
Book value: A car’s estimated value from a pricing guide such as Kelley Blue Book, Edmunds or J.D. Power. Book values are a starting point; real offers and local listings are better evidence.See also: Private party value, MMR
Branded title: A title marked by the state to show a car’s serious history, such as salvage (declared a total loss), rebuilt or reconstructed, flood or lemon buyback. Branded-title cars sell for much less and can be harder to insure and finance. Example and what to say →
Bumper-to-bumper warranty: The comprehensive part of a factory warranty, covering most components for a set term, commonly around 3 years or 36,000 miles. Wear items are excluded.See also: Factory warranty, Powertrain warranty
Buy here, pay here: A used-car dealer that finances the car itself instead of sending the loan to a bank. It can approve buyers others turn down, but prices and interest rates are usually high and repossession can be quick. Example and what to say →
Buy rate: The interest rate a lender approves you for when a dealer submits your loan application. The dealer may be allowed to charge you a higher contract rate and keep part of the difference, so the rate you’re offered may not be the rate you qualified for. Example and what to say →
Buyers Guide: A window sticker that the FTC’s Used Car Rule requires dealers to display on used cars for sale. It says whether the car is sold as-is or with a warranty, describes any warranty, and lists major problems to look for. Example and what to say →
Buyer’s order: The document that lists the agreed vehicle, price, fees, taxes, trade and total, sometimes called a purchase agreement. Check every line before signing the financing contract.See also: Out-the-door price, Retail installment contract

C

Cap cost reduction: Money that lowers the capitalized cost of a lease, such as a cash down payment, a rebate or trade-in equity. It lowers the monthly payment, but cash put down on a lease is usually lost if the car is totaled or stolen early. Example and what to say →
Capitalized cost: The price of the car in a lease, plus any fees or products rolled into the lease. After subtracting down payment, rebates and trade equity you get the adjusted cap cost, which the payment is calculated from. Example and what to say →
Captive lender: A finance company owned by an automaker, such as the brand’s own credit arm. Captives offer the promotional rates and lease programs tied to that brand.See also: Rebate, Money factor
Certified pre-owned: A used car that has passed an inspection program and comes with an extended warranty, usually backed by the manufacturer. CPO cars cost more than similar non-certified cars; the premium buys warranty coverage and a cleaner selection. Example and what to say →
Closed-end lease: The standard consumer lease, where you can return the car at the end without owing for any drop in market value, apart from excess wear, excess miles and fees.See also: Open-end lease
Co-buyer: A second borrower who shares both the loan obligation and ownership of the car. Unlike a co-signer, a co-buyer is usually also on the title.See also: Co-signer
Collision coverage: Insurance that pays to repair or replace your car after a crash, minus your deductible. It is required on most financed and leased cars.See also: Full coverage, Deductible
Comprehensive coverage: Insurance for damage from things other than a collision, such as theft, hail, flood or fire. It’s usually required on financed and leased cars.See also: Full coverage
Conquest cash: A manufacturer incentive for owners of a competing brand who switch. Eligibility rules vary, so ask for the program terms in writing.See also: Rebate, Loyalty cash
Consignment: Having a dealer or service sell your car for you in exchange for a fee or a share of the price. You may get more than a trade-in but wait longer to be paid.See also: Private party value
Cooling-off period: A right to cancel a purchase within a few days. There is no general federal right to return a car bought at a dealership; a few states have limited rules or require a cancellation option, so check yours.See also: Spot delivery
Co-signer: A person who signs a loan with the borrower and becomes legally responsible for the full debt if the borrower doesn’t pay. A co-signer can help someone with thin or weak credit qualify, but the loan shows on both credit reports. Example and what to say →
Credit disability insurance: Optional insurance that makes your car payments for a time if you become disabled. Read the waiting periods and exclusions before buying.See also: Credit life insurance
Credit life insurance: Optional insurance that pays off your car loan if you die. Regular term life insurance often costs less and covers more.See also: Credit disability insurance, F&I
Credit score: A three-digit number summarizing your credit risk. Car lenders often use an auto-specific version of the score to set your rate tier.See also: FICO Auto Score, Credit tier
Credit tier: A band of credit scores a lender uses to price loans and leases. Moving up one tier can lower your rate noticeably.See also: APR, Subprime auto loan
Credit union: A member-owned financial institution that often offers competitive car loan rates. A credit union pre-approval is a strong benchmark against dealer financing.See also: Pre-approval
Curbstoning: Unlicensed dealers posing as private sellers to sell cars, often with hidden problems. Be wary of a seller whose name isn’t on the title or who has several cars listed.See also: Title washing, Private party value

D

Days supply: How many days a dealer’s or the market’s current inventory of a model would last at the current sales pace. High days supply usually means more room to negotiate.See also: Aged inventory
DC fast charging: High-power public EV charging that can add a large share of range in well under an hour. It costs more per kWh than home charging.See also: Level 2 charging
Deal unwind: Reversing a completed car sale, returning the car and refunding the buyer. It happens most often when financing isn’t approved on a spot-delivered car.See also: Spot delivery
Deal worksheet: The sheet a salesperson uses to present numbers during negotiation. It isn’t a contract; the buyer’s order and financing contract are what count.See also: Four-square, Buyer’s order
Dealer add-ons: Products and services a dealer adds to a car and charges for on top of the price, such as nitrogen-filled tires, VIN etching, paint sealant, pinstripes or anti-theft devices. They are usually listed on a separate addendum sticker and are high-profit and negotiable. Example and what to say →
Dealer auction: A wholesale auction, physical or online, where dealers buy and sell used cars. Trade-ins a dealer doesn’t want to retail usually go there.See also: MMR, Wholesale value
Dealer cash: A manufacturer incentive paid to the dealer, not the buyer, to help move certain models. It is often not advertised, and the dealer can keep it or use it to lower your price. Example and what to say →
Dealer holdback: Money the manufacturer pays back to the dealer after a new car is sold, commonly a small percentage of MSRP or invoice. It lets a dealer sell near invoice and still earn a profit, and it is rarely shown to buyers. Example and what to say →
Dealer pack: A fixed amount a dealership adds to its own cost of each car (often used cars) before calculating profit and commission. It covers overhead and reduces what the store reports as gross, and it also affects how much the dealer will pay for a trade-in. Example and what to say →
Dealer prep fee: A dealer charge for getting a new car ready for delivery. Manufacturers generally pay dealers for pre-delivery inspection, so a separate prep fee is usually extra profit and negotiable.See also: Destination charge, Junk fees
Dealer reserve: The money a lender pays a dealer for arranging your loan, usually funded by marking up your interest rate above the lender’s buy rate. It is a normal part of dealer financing, and it is the reason the same buyer can get different rates at different stores. Example and what to say →
Dealer trade: When your dealer gets the car you want from another dealer’s inventory in exchange for one of its own. It’s common on new cars and shouldn’t add a fee.
Dealer-installed options: Accessories added at the dealership rather than the factory, such as wheel locks, mud flaps or tint. They can be useful, but prices are set by the dealer and negotiable.See also: Dealer add-ons
Debt-to-income ratio: Your monthly debt payments divided by your gross monthly income. Lenders use it to decide how much they’ll lend.See also: Payment-to-income ratio
Deductible: The amount you pay toward a repair or insurance claim before coverage pays the rest. A low deductible usually means a higher price for the contract or policy.See also: Vehicle service contract
Deferred first payment: A promotion that delays your first car payment, often by 60 to 90 days. Interest usually still accrues during the delay.See also: Simple-interest loan
Deficiency balance: What you still owe after a repossessed car is sold for less than the loan balance plus costs. Lenders can pursue collection of it.See also: Repossession
Demo vehicle: A new car the dealer has used for test drives or as a staff car, with some miles on it. It should sell for less than an identical unused car, and you should confirm when the factory warranty started.See also: Factory warranty
Depreciation fee: The part of a monthly lease payment that covers the car’s expected loss in value: adjusted cap cost minus residual, divided by the months.See also: Capitalized cost, Residual value
Desking: The process of a sales manager structuring the numbers of a deal: price, trade, down payment and payment. Desking software and the four-square worksheet are the tools used.See also: Four-square, Sales manager
Destination charge: A fee set by the manufacturer to ship a new car to the dealership, listed on the window sticker and included in MSRP. It is the same for a given model no matter how far the dealer is from the factory, and it is generally not negotiable. Example and what to say →
Diminished value: The loss in a car’s market value after an accident, even when it’s fully repaired. Some states let you claim it from the at-fault driver’s insurer.See also: Vehicle history report
Direct lending: Getting a car loan directly from a bank, credit union or online lender instead of through the dealer. It gives you a rate you control before you shop.See also: Pre-approval
Disposition fee: A fee charged at the end of a lease when you return the car instead of buying it, to cover cleaning, inspection and resale. It is set in your lease contract, often a few hundred dollars, and is frequently waived if you lease or buy another car from the same brand. Example and what to say →
Doc fee: A fee the dealer charges for preparing and processing the sales paperwork. It is set by the dealer, not the government; a few states cap it, and amounts range from under $100 to roughly $1,000 depending on the state. Example and what to say →
Down payment: Cash you pay up front toward a car purchase, which reduces the amount you borrow. A larger down payment lowers the payment and interest and helps you avoid owing more than the car is worth. Example and what to say →
Due at signing: The total cash you pay when you sign a lease: typically the first month’s payment, fees, taxes, registration and any cap cost reduction. “$0 down” usually doesn’t mean $0 due at signing. Example and what to say →

E

Early termination: Ending a lease before its scheduled end, which usually triggers a payoff and fees spelled out in the contract. Selling or trading the car can be cheaper if it has equity.See also: Lease equity, Lease transfer
Employee pricing: A discount program for employees of an automaker or its partner companies, sometimes extended to the public as a promotion. It’s a fixed price, so it may or may not beat a well-negotiated deal.See also: Invoice price
Equity: The amount your car is worth above what you owe on it. Positive equity can go toward your next car; negative equity has to be paid or rolled over.See also: Negative equity, Lease equity
Excess mileage charge: The per-mile fee for driving more than your lease allows, set in the contract. Commonly 15 to 30 cents a mile.See also: Mileage allowance
Excess wear and tear: Damage or wear beyond what a lease contract considers normal, such as large dents, curb-damaged wheels, worn-out tires or interior stains. You’re billed for it when you return the car. Example and what to say →
Exclusionary coverage: A service contract that covers everything except a listed set of exclusions. It is generally the most comprehensive type.See also: Vehicle service contract, Stated-component coverage
Express warranty: A specific written or spoken promise about a car’s condition or coverage. Get any such promise in writing.See also: Implied warranty, We-Owe
Extended warranty: The common name for a vehicle service contract that pays for certain repairs beyond or alongside the factory warranty. It is optional and its price is negotiable.See also: Vehicle service contract

F

Factory order: Ordering a new car built to your specification instead of buying from stock. It can take weeks or months, but you get exactly what you want and often avoid market adjustments.See also: Market adjustment, Allocation
Factory warranty: The warranty a manufacturer includes with a new car, covering defects for a set time or mileage. It usually has a shorter comprehensive (bumper-to-bumper) part and a longer powertrain part. Example and what to say →
Federal EV tax credit: Federal clean-vehicle credits for buying or leasing EVs ended for vehicles acquired after September 30, 2025. Some state and utility incentives may still apply; check current programs where you live.See also: Rebate
F&I: The dealership department that handles contracts, financing and the sale of add-on products such as service contracts, GAP and protection plans. It is often the most profitable part of a car deal for the dealer. Example and what to say →
FICO Auto Score: A version of the FICO score built for auto lending, weighted toward your history with car loans. It can be higher or lower than the base score you see in apps.See also: Credit score, Credit tier
Finance charge: The total dollar cost of credit over the life of the loan, mainly interest. It’s one of the Truth in Lending disclosures on your contract.See also: APR, Amount financed
Flood damage: Water damage that can cause electrical and corrosion problems for years. Look for a flood brand, silt or rust in hidden places, and musty smells, and check the car’s registration history.See also: Branded title, Title washing
Floor plan: The line of credit dealers use to finance the cars on their lot. The dealer pays interest on each car until it sells, which is why older inventory is more negotiable.See also: Aged inventory, Dealer holdback
Four-square: A dealership worksheet divided into four boxes: price, trade-in value, down payment and monthly payment. It lets the salesperson move money between boxes so the buyer focuses on the payment instead of the total. Example and what to say →
Frame damage: Damage to a car’s structural frame or unibody, usually from a serious collision. Properly repaired it can be safe, but it reduces value; have a body shop inspect it.See also: Pre-purchase inspection
Front end and back end: Dealership terms for the two places profit is made: the front end is the vehicle sale and trade, the back end is financing, rate markup and products. A small front-end discount can be paid for on the back end.See also: F&I, Dealer reserve
Full coverage: An informal term for a policy with liability plus collision and comprehensive coverage. Lenders and leasing companies usually require it.See also: Collision coverage, Comprehensive coverage

G

GAP insurance: Coverage that pays the difference between what your car insurance pays if the car is totaled or stolen and what you still owe on the loan or lease. It matters most when you owe more than the car is worth. Example and what to say →
Goodwill repair: A repair a manufacturer or dealer pays for, fully or partly, after the warranty has expired, as a courtesy. Ask politely, with service records in hand.See also: Factory warranty, Technical service bulletin (TSB)
Gross profit: A dealer’s profit on a deal before overhead. Front-end gross comes from the car and trade; back-end gross comes from financing and products in the F&I office.See also: Front end and back end, Dealer pack

H

Hard inquiry: A credit check made when you apply for credit, recorded on your credit report. It can lower your score slightly; credit scoring models usually count several auto-loan inquiries within a short window as one. Example and what to say →
Holder Rule: An FTC rule that lets you raise claims against the seller with the lender that bought your financing contract. Dealer contracts must include the Holder notice.See also: Retail installment contract
Holding deposit: Money paid to reserve a car before purchase. Get in writing whether it is refundable and under what conditions.See also: Buyer’s order

I

Implied warranty: Unwritten, legally assumed promises that a car is fit to be driven and to do what cars ordinarily do. Dealers can disclaim them on an as-is sale in many states, but not all.See also: As-is, Express warranty
Indirect lending: Financing arranged by the dealer, which sends your application to lenders and earns compensation. It’s convenient, but the rate may include a markup.See also: Buy rate, Dealer reserve
Instant cash offer: A cash offer for your car from an online buyer or dealer, based on information you enter, usually valid for about a week and subject to an inspection. It’s a quick way to set a floor before trading in. Example and what to say →
Interest rate: The percentage a lender charges on the money you borrow. On most car loans it equals the APR, but the APR is the figure required on the contract and the one to compare.See also: APR
Internet price: A dealer’s online price, often lower than the window sticker. Check whether it requires dealer financing or excludes add-ons and fees.See also: Advertised price, Out-the-door price
Internet sales manager: The person who handles a dealer’s online and email leads. Contacting them is often the fastest way to get a written out-the-door quote without a long showroom visit.See also: Out-the-door price
Invoice price: The amount the manufacturer bills the dealer for a new car. It is usually a few percent below MSRP, but it is not the dealer’s true cost, because holdback and factory incentives can lower what the dealer really pays. Example and what to say →

J

Junk fees: Vague dealer charges with little or no real service behind them, such as “prep,” “handling,” “admin” or “reconditioning” fees on new cars. Ask what each fee is for and negotiate the out-the-door price.See also: Doc fee, Out-the-door price

K

Key replacement coverage: An add-on that pays to replace lost or damaged key fobs. Fobs can be expensive, but price a replacement before paying for the product.See also: F&I

L

Late fee: A charge for a payment received after the grace period in your contract. Set up autopay or reminders so a missed date doesn’t become a credit problem.See also: Simple-interest loan
Lease: A contract to use a car for a set term and mileage, paying for its expected depreciation plus a rent charge, then returning or buying it. Most consumer car leases are closed-end.See also: Residual value, Money factor
Lease buyout: Buying your leased car, either at the end of the lease for the residual value plus any purchase option fee, or early for the remaining payoff. It can be a good deal when the car is worth more than the buyout. Example and what to say →
Lease equity: The amount by which a leased car’s market value exceeds its buyout price. You can capture it by buying the car, trading it in, or selling it, if your leasing company allows that route. Example and what to say →
Lease loyalty: Incentives or fee waivers for current lessees who lease another car from the same brand, such as a waived disposition fee or a lease-loyalty rebate.See also: Disposition fee, Loyalty cash
Lease tax: Sales tax on a lease, which most states charge on each monthly payment and some charge up front on the full price or the total of payments. Your state’s method changes the cost of a lease.See also: Due at signing
Lease term: The length of a lease in months, commonly 24, 36 or 39. Residuals and money factors are set for specific terms, so the best payment isn’t always at 36 months.See also: Residual value
Lease transfer: Handing your lease to another person who takes over the payments, if the leasing company allows it. There may be fees, and you may stay partly liable.See also: Early termination
Lease-end inspection: The leasing company’s check of a returned car for excess wear and damage. Most offer a free pre-inspection a few weeks before turn-in.See also: Excess wear and tear
Lease-wear protection: An optional product that covers excess-wear charges at turn-in up to a limit. Weigh its price against what you’d realistically be charged.See also: Excess wear and tear
Lemon buyback: A car the manufacturer repurchased under a lemon law, which may carry a title brand when resold. Ask for the repair history and disclosure.See also: Lemon law, Branded title
Lemon law: State laws that require a manufacturer to repurchase or replace a vehicle with a serious defect it couldn’t fix after a reasonable number of attempts. Coverage, time limits and process vary by state, and most apply mainly to new cars. Example and what to say →
Level 2 charging: Home or public EV charging at 240 volts, much faster than a standard household outlet. Home installation costs vary with your electrical panel and wiring.See also: DC fast charging
Liability coverage: Insurance that pays for injuries and damage you cause to others. Every state sets a minimum, but minimums are often low.See also: Full coverage
Lien: A lender’s legal claim on a car until the loan is paid off. The lienholder is recorded on the title, and the car can’t be sold with a clean title until the lien is released. Example and what to say →
Lienholder: The lender with a legal claim on your car until the loan is paid. It is listed on the title.See also: Lien
Loan term: The length of a car loan in months. A longer term lowers the monthly payment but raises total interest and keeps you owing more than the car is worth for longer. Example and what to say →
Loaner car: A car the dealer’s service department lends to customers during repairs, later sold as new or used with extra miles. Like a demo, it should be discounted and its warranty start date checked.See also: Demo vehicle
Loan-to-value (LTV): The loan amount compared with the car’s value, as a percentage. High LTV, often from negative equity or products, can mean a higher rate or a declined application.See also: Negative equity, Amount financed
Loss payee: The lender or leasing company named on your insurance policy to receive payment if the car is totaled. They get paid before you do.See also: Lien, GAP insurance
Loyalty cash: A manufacturer incentive for current owners or lessees of the same brand who buy or lease another. You may need proof of ownership or a current registration.See also: Rebate, Conquest cash

M

Magnuson-Moss Warranty Act: A federal law governing written consumer warranties. It requires clear warranty terms and can help when a warranty isn’t honored.See also: Lemon law, Factory warranty
Market adjustment: An extra charge a dealer adds above MSRP on a new car, usually on a model in short supply. It is pure dealer profit, set by the dealer alone, and fully negotiable. Example and what to say →
Mileage allowance: The number of miles per year a lease allows, often 10,000, 12,000 or 15,000. Going over means a per-mile charge at turn-in, set in the contract. Example and what to say →
Mini deal: A deal on which the salesperson earns only a minimum flat commission because the gross profit was small. It’s a sign you negotiated well, not a reason to pay more.See also: Gross profit
MMR: The Manheim Market Report: a wholesale value for a used car based on recent dealer-auction sales of similar vehicles. Dealers use it as a main reference for what to pay for trade-ins and what to pay at auction. Example and what to say →
Model-year closeout: The period when dealers clear the outgoing model year as new models arrive, often with larger incentives. The trade-off is that the car is a year older on paper at resale.See also: Dealer cash, Rebate
Money factor: The interest rate on a lease, written as a small decimal such as 0.00250. Multiply it by 2,400 to get the approximate equivalent APR (0.00250 × 2,400 = 6.0%). Example and what to say →
Monroney sticker: The federally required window sticker on new cars, listing the base price, factory options, destination charge, MSRP, fuel economy and safety ratings. It is named after the senator who sponsored the 1958 law.See also: MSRP, Destination charge
MSRP: The manufacturer’s suggested retail price: the price the automaker recommends for a new car with its factory options and destination charge, printed on the window sticker. It is a starting point for negotiation, not what the dealer paid and not what you have to pay. Example and what to say →
Multiple security deposits: A program some leasing companies offer where extra refundable deposits lower your money factor. Availability depends on brand and state.See also: Money factor, Security deposit

N

Negative equity: Owing more on your car loan than the car is worth. If you trade the car in, the difference has to be paid off, often by rolling it into your next loan, which raises that loan and its interest. Example and what to say →
Nitrogen-filled tires: Tires filled with nitrogen instead of ordinary air, often sold as a dealer add-on. Regular air is already mostly nitrogen, and the practical benefit for everyday drivers is small.See also: Dealer add-ons
NMVTIS: The National Motor Vehicle Title Information System, a federal database of title and brand data from states, insurers and salvage yards. Approved providers sell low-cost reports from it.See also: Title washing, Vehicle history report

O

Odometer disclosure: The seller’s written statement of a car’s mileage at transfer, required by federal law for most vehicles. For model year 2011 and newer cars it is required for 20 years.See also: Odometer rollback
Odometer rollback: Illegally lowering a car’s displayed mileage to raise its value, now often done digitally. Compare mileage records in history reports and service records.See also: Odometer disclosure, Vehicle history report
One-pay lease: A lease where you pay all the monthly payments up front in one sum, often at a lower money factor. It saves money but puts more cash at risk if the car is totaled.See also: Money factor, Due at signing
Open-end lease: A lease, mostly used for business vehicles, where you owe the difference if the car is worth less than the residual at the end. It shifts the value risk to you.See also: Closed-end lease
Options package: A bundle of factory features sold together, such as a technology or cold-weather package. Packages are listed on the window sticker and affect both price and resale value.See also: MSRP, Trim level
Out-the-door price: The total you pay to drive the car away: the vehicle price plus taxes, title and registration, the dealer’s doc fee and any add-ons, minus rebates. It is the one number that can’t be shuffled, so it is the number to negotiate and compare. Example and what to say →
Over-allowance: Showing a trade-in value higher than the car’s real worth, then recovering the difference through a higher price on the car you’re buying. Compare the price with and without the trade to spot it.See also: Actual cash value, Trade-in appraisal

P

Paint protection: A sealant or ceramic coating applied to the paint, sometimes with a limited guarantee, usually sold by the dealer at a large markup. A professional detailer often charges far less for a comparable coating.See also: Dealer add-ons, Protection package
Paintless dent repair coverage: An add-on that pays for small dent and ding repairs without repainting. Value depends on where you park and how often you’d use it.See also: F&I
Payment packing: Quoting a monthly payment that is higher than the agreed price and rate require, so there is room to add products such as a service contract or GAP without the buyer noticing. It is a sales tactic, and in some situations it can be an unfair or deceptive practice. Example and what to say →
Payment-to-income ratio: Your car payment as a share of your gross monthly income. Many lenders set a cap, and keeping it lower leaves room in your budget.See also: Debt-to-income ratio
Payoff amount: The exact amount needed to pay off a loan in full on a specific date, including interest that has built up since your last payment. It’s usually a little higher than the balance shown on your statement. Example and what to say →
Per diem interest: The interest a loan accrues each day. It is used to calculate an exact payoff amount for a given date.See also: Payoff amount
Plug-in hybrid (PHEV): A car with a gas engine and a battery you can charge from an outlet for a limited electric-only range. It makes the most sense if you can charge daily.See also: Level 2 charging
Port-installed options: Accessories installed at the port of entry before a car reaches the dealer. They usually appear on the factory window sticker and are harder to remove than dealer add-ons.See also: MSRP
Power booking: Inflating a car’s listed options or trim on a loan application to make it look more valuable to the lender. It is a form of loan fraud; check that the vehicle described on your contract matches your car.See also: Loan-to-value (LTV)
Powertrain warranty: Factory coverage for the engine, transmission and drive components, usually longer than the bumper-to-bumper warranty. Some long powertrain warranties apply only to the original owner.See also: Factory warranty
Pre-approval: A conditional loan approval from a bank, credit union or online lender before you shop, with a set maximum amount, rate and term. It gives you a real rate to compare against dealer financing and lets you negotiate as a cash-style buyer. Example and what to say →
Precomputed interest: A loan where total interest is calculated up front, so paying early saves less than on a simple-interest loan. It’s less common on car loans today.See also: Simple-interest loan, Rule of 78s
Prepaid maintenance: A plan that pays for scheduled maintenance like oil changes in advance, usually at one dealer or brand network. Compare the price with the actual cost of the services you’ll use.See also: F&I
Prepayment penalty: A fee for paying a loan off early. Most mainstream car loans don’t have one, but check the contract.See also: Simple-interest loan, Refinancing
Pre-purchase inspection: An inspection of a used car by an independent mechanic before you buy. It typically costs a few hundred dollars or less and can reveal problems that change the price or the decision. Example and what to say →
Pre-qualification: An estimate of the loan you might get, often based on a soft credit check. It’s useful for budgeting but isn’t a firm offer like a pre-approval.See also: Pre-approval, Soft inquiry
Private party value: The price a car typically sells for between two individuals, without a dealer. It’s usually higher than a trade-in value and lower than dealer retail. Example and what to say →
Program car: A late-model used car that came from a rental fleet or a manufacturer program. It can be a good value with a clean history, but check maintenance records and condition.See also: Vehicle history report
Pro-rata refund: A refund based on the unused portion of a product, such as a service contract or GAP, when you cancel early or pay off the loan. A cancellation fee may apply.See also: Vehicle service contract, GAP insurance
Protection package: A bundle of dealer add-ons, such as paint sealant, fabric protection and etching, sold as one line on the worksheet. Ask for each item’s price and decline what you don’t want.See also: Dealer add-ons, Paint protection
Pull-ahead program: A manufacturer offer that waives some remaining lease payments if you lease a new car from the same brand early. Compare it with a normal lease-end trade.See also: Lease loyalty
Purchase option fee: A fee some leases charge when you buy the car at lease end, added to the residual. It is stated in your lease contract.See also: Lease buyout

R

Rate-shopping window: The period in which credit scoring models count multiple auto-loan inquiries as one, from 14 to 45 days depending on the model. Do your loan shopping inside it.See also: Hard inquiry
Rebate: A discount the manufacturer gives the buyer on a new car, usually applied at the dealership as cash off the price. Rebates are often offered instead of special low-rate financing, so you may have to choose one or the other. Example and what to say →
Rebuilt title: A title brand for a former salvage car that was repaired and passed a state inspection. It’s legal to drive but worth much less and can be harder to insure.See also: Branded title, Salvage title
Recall: A manufacturer or NHTSA action to fix a safety defect, repaired free at a brand dealer. Check any car’s VIN on the NHTSA recall lookup before buying.See also: VIN, Technical service bulletin (TSB)
Reconditioning: The repairs, parts and detailing a dealer does to make a used car ready to sell. Its expected cost is subtracted when the dealer values your trade.See also: Trade-in appraisal, Reconditioning fee
Reconditioning fee: A charge some dealers add on used cars for cleaning, repairs and inspection. Reconditioning is a normal cost of selling a used car and should already be in the price, so treat a separate fee as negotiable.See also: Dealer pack, Junk fees
Refinancing: Replacing your current car loan with a new loan, usually at a lower rate or a different term. It makes sense when rates have dropped, your credit has improved or the original dealer rate was marked up. Example and what to say →
Registration: The state record that lets a car be driven on public roads, renewed on a schedule. It is separate from the title, which proves ownership.See also: Title and registration fees
Release of liability: A form many states require sellers to file after selling a car, telling the DMV you no longer own it. It protects you from tickets or tolls incurred by the buyer.See also: Bill of sale
Rent charge: The finance part of a lease payment, calculated with the money factor. It’s the lease equivalent of interest.See also: Money factor
Repossession: When a lender takes back a financed car after default, often without a court order, depending on state law. You may still owe a deficiency balance after the car is sold.See also: Deficiency balance, Lien
Residual value: The leasing company’s estimate of what the car will be worth at the end of the lease, set as a percentage of MSRP. A higher residual means less depreciation to pay for, so a lower payment; it is also the price you can usually buy the car for at lease end. Example and what to say →
Retail installment contract: The contract you sign when you finance through a dealer. The dealer is the original creditor and usually assigns it to a bank or finance company.See also: F&I, Arbitration clause
Retail value: What a dealer typically sells a used car for on its lot. It is higher than wholesale and private-party values because it includes reconditioning, overhead and profit.See also: Wholesale value, Private party value
Risk-based pricing notice: A notice telling you that your loan terms were set based on your credit report, sometimes provided with your credit score. It’s a prompt to check your report for errors.See also: Credit tier
Roadside assistance: Help with towing, flat tires, lockouts and jump-starts. It is often already included with new-car warranties, auto insurance or memberships, so check before paying again.See also: Factory warranty
Rule of 78s: An old method of front-loading interest on precomputed loans. Federal law bars it on consumer loans longer than 61 months.See also: Precomputed interest

S

Sales manager: The manager who approves prices and trade values, often called the desk manager. Salespeople usually can’t agree to a number without their sign-off.See also: Desking, Four-square
Sales tax trade-in credit: In most states, you pay sales tax only on the difference between the new car’s price and your trade-in value. That tax saving is part of what a trade-in is worth compared with selling privately. Example and what to say →
Salvage title: A title brand showing that a car was declared a total loss, usually by an insurer. It generally can’t be registered for the road until rebuilt and inspected, depending on the state.See also: Branded title, Rebuilt title
Security deposit: A refundable deposit some leases require, returned at the end if you meet the contract terms. It isn’t a down payment.See also: Multiple security deposits
Service contract administrator: The company that handles claims on a service contract, which may be different from the company that sold it. Check its reputation before buying.See also: Vehicle service contract
Sign and drive: A lease promotion with little or nothing due at signing, often because fees and the first payment are rolled in or covered by the maker. The monthly payment is usually higher to compensate.See also: Due at signing
Simple-interest loan: A loan where interest is charged daily on the outstanding balance. Paying early or paying extra reduces interest right away, and paying late increases it. Most US car loans work this way. Example and what to say →
Small claims court: A simplified court for disputes up to a state-set dollar limit, often without a lawyer. Many arbitration clauses allow small-claims cases.See also: Arbitration clause
Soft inquiry: A credit check that doesn’t affect your score, such as checking your own credit or many pre-qualification tools. Lenders use a hard inquiry for an actual application.See also: Hard inquiry
Spiff: A bonus paid to a salesperson or finance manager for selling a specific car or product. It explains why some products get pushed harder than others.See also: F&I
Spot delivery: When a dealer lets you take a car home before your financing is final. If the lender doesn’t approve the deal as written, the dealer may call you back to sign a new contract at a worse rate, which is known as yo-yo financing. Example and what to say →
Stair-step incentive: A manufacturer bonus paid to a dealer for hitting monthly or quarterly sales targets. A dealer close to a target may accept a smaller profit on your car near month-end.See also: Dealer cash
Stated-component coverage: A service contract that covers only the parts listed in it. Anything not listed is not covered.See also: Exclusionary coverage
Stipulations (stips): Documents a lender requires before funding a loan, such as proof of income, residence or insurance. Provide them quickly to avoid delays in a conditional deal.See also: Spot delivery
Subprime auto loan: A car loan for borrowers with low credit scores or limited credit history, usually at a much higher interest rate. Lenders price these loans for higher risk, so the total cost can be thousands more than a prime loan. Example and what to say →
Subvented lease: A lease supported by the manufacturer through an inflated residual, a reduced money factor or cash, to make payments cheaper. These are often the best lease deals.See also: Residual value, Money factor

T

Tax, title and license (TT&L): Shorthand for sales tax plus government title and registration fees on a car purchase. Ask for it itemized and check the amounts with your state.See also: Title and registration fees, Out-the-door price
Technical service bulletin (TSB): A manufacturer notice to dealers about a known issue and how to repair it. It isn’t a recall, but it can help you get a covered or goodwill repair.See also: Recall, Goodwill repair
Temporary tag: A paper or temporary plate the dealer issues so you can drive while permanent registration is processed. If it is about to expire and your plates or title haven’t arrived, contact the dealer and your DMV.See also: Title and registration fees
Test drive: Driving the car before you buy, ideally on roads you use every day, including highway speeds and parking. Bring your license and proof of insurance, and keep it to evaluating the car, not negotiating.
Tire and wheel protection: An add-on product that pays to repair or replace tires and wheels damaged by road hazards such as potholes, nails and debris. It can be useful for low-profile tires and expensive wheels, but it is often overpriced at the dealer. Example and what to say →
Title: The legal document showing who owns a car and any lienholder. You need it, signed correctly, to sell or transfer the car.See also: Lien, Branded title
Title and registration fees: The state charges to put the car in your name (title) and legally on the road (registration and plates). They are set by the state and passed through by the dealer, but a separate dealer “registration service” fee is the dealer’s own charge. Example and what to say →
Title washing: Hiding a car’s branded title (salvage, flood, rebuilt or lemon) by re-titling it in a state with different branding rules so the new title looks clean. It’s a form of fraud aimed at used-car buyers. Example and what to say →
Total loss: When an insurer decides a car is too costly to repair relative to its value. You are paid its actual cash value minus your deductible.See also: Actual cash value, GAP insurance
Total of payments: What you will have paid by the end of the loan if you make every payment on schedule: the amount financed plus the finance charge. It shows the true cost of a long loan.See also: Amount financed, Finance charge
Tote the note: Dealer slang for a dealership that finances its own sales. It is another name for buy here, pay here.See also: Buy here, pay here
Trade-in: Selling your current car to the dealer as part of buying another one. The value is credited toward your purchase and, in most states, reduces the sales tax you owe.See also: Trade-in appraisal, Sales tax trade-in credit
Trade-in appraisal: The dealer’s inspection and valuation of the car you want to trade in. The appraiser estimates what the car will sell for, subtracts reconditioning and profit, and makes an offer below that ceiling. Example and what to say →
Trim level: A version of a model with a set of standard features, such as base, sport or limited. Comparing the same trim across dealers is how you compare prices fairly.See also: MSRP
True mileage unknown (TMU): A title or disclosure note that the odometer reading may not be accurate. It lowers value significantly and should be explained before you buy.See also: Odometer rollback
Truth in Lending disclosure: The federally required box on a credit contract showing the APR, finance charge, amount financed and total of payments. Read it before signing; it is the summary of your loan.See also: APR, Amount financed
Turnover (T.O.): When a salesperson hands you to a manager or another salesperson to close the deal. It’s a normal tactic; you can stay polite and stick to your number.See also: Sales manager

U

Upside down: Owing more on a car loan than the car is worth. It’s another name for negative equity.See also: Negative equity, GAP insurance

V

Vehicle history report: A report built from a car’s VIN that lists recorded events such as title brands, reported accidents, odometer readings, ownership changes and some service visits. It’s a useful screen, but it only shows what was reported. Example and what to say →
Vehicle service contract: An optional contract, sold separately from the car, that pays for certain repairs after (or alongside) the factory warranty. Often called an extended warranty, it’s technically a service contract, and its price is usually negotiable. Example and what to say →
VIN: The vehicle identification number, a 17-character code unique to each car. Use it to pull history reports, check recalls and confirm the exact car in a quote.See also: Vehicle history report, Recall
VIN etching: Etching the car’s vehicle identification number into its windows to discourage theft and help recovery. Dealers often charge hundreds of dollars for it; do-it-yourself kits cost far less. Example and what to say →
Voluntary surrender: Giving the car back to the lender when you can’t pay. It’s reported like a repossession, and you may still owe the difference after the car is sold.See also: Repossession, Deficiency balance

W

We-Owe: A written document listing everything the dealer has promised to provide or fix after the sale, such as a second key, floor mats or a repair. If a promise isn’t written down, it’s very hard to enforce. Example and what to say →
Wholesale value: What dealers pay each other for a car, usually at auction. Trade-in offers are based mainly on wholesale value, not retail.See also: MMR, Actual cash value
Windshield protection: An add-on that pays for chip repair or windshield replacement. Check first whether your auto insurance already covers glass.See also: F&I

Y

Yo-yo financing: When a dealer lets you drive home, then calls you back to sign a new contract with worse terms because the original financing supposedly fell through. Rules vary by state; don’t sign anything new on the spot.See also: Spot delivery

Z

0% financing: A promotional loan with no interest, offered by a manufacturer’s finance company to buyers with strong credit. It often replaces a cash rebate, so compare both.See also: Rebate, Captive lender

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Out-the-door price explained

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